Early retirement benefits

This is a guide on what you need to know if you choose either to opt out of or make use of the early retirement scheme.

When it comes to the early retirement scheme, you have several options.

The early retirement scheme offers you several opportunities for greater flexibility at work when you’re approaching normal pension age.

  • You can retire early 3-5 years before your state pension age. However, your pension savings may affect the early retirement benefits you get significantly.
  • You can get a tax-free premium if you stay on the labour market until your normal pension age. This is also the case if you retire early, but continues to work
  • You are guaranteed a senior job if you lose your benefits less than five years before you can retire early

To be able to make use of these options, you must generally join the early retirement scheme on the day you turn 30 at the latest. You also need to pay an early retirement contribution on top of your membership fee for up to 30 years.

You’re free to opt out of the early retirement scheme at any time. The money you’ve paid can be transferred to another pension plan and in some cases be repaid in cash.

Consider your situation carefully before opting out of the early retirement scheme

Here are some of the things you should consider:

  • How do your pension savings affect your right to early retirement benefits
  • Will you be able to work long enough to obtain the tax-free premium, and how long do you plan to continue working?
  • Your risk of becoming unemployed late in life, which may make a senior job relevant, and whether you would be interested in a senior job at your local municipality

FAQs about the early retirement scheme

The early retirement certificate is a certificate stating whether you’re entitled to early retirement benefits even if you later become sick. As soon as you meet the conditions for receiving early retirement benefits, we issue you with an early retirement certificate.

It’s a really good idea to get an early retirement certificate. When we issue an early retirement certificate, we also make a calculation of the early retirement benefit rate you can get when and if you choose to retire early − and regardless of how long you choose to postpone your early retirement.

In that way, the early retirement certificate serves as a kind of insurance. Should you become sick or otherwise be unable to meet the criteria for getting a high early retirement benefit rate when time comes, your rate has already been calculated and guaranteed in your early retirement certificate.

From the day you receive your early retirement certificate, you are no longer required to pay into the early retirement scheme.

Read more about the early retirement certificate

If you meet the conditions for retiring early, you’ll be able to retire from the labour market before the state pension age.

When you reach the early retirement age and if you also meet the conditions for retiring early, you will be issued with an early retirement certificate from CA. The certificate gives you, among other things, the right to retire early, even if you become sick later.

In order to retire early, you must be eligible for benefits, and you must have paid into the early retirement scheme for at least 30 years.

When you’ll be able to retire early, and for how long, depends on your age. 

Overview of early retirement and state pension age

If you retire directly from an employment relationship, we base the calculation of your early retirement benefit rate on the twelve months with the highest pay you have had in the past 24-month period.

In order to receive the highest early retirement rate you must:

  • have earned an average of at least DKK 23,371 per month for twelve months in the past 24-month period before you are issued with your early retirement certificate.
  • postpone your transition to early retirement for a certain period of time and have worked a certain number of hours

If you postpone your early retirement for a period after the issue of the early retirement certificate, you’ll be able to retire early with a higher benefit rate than if you retire right away and, as a minimum, with the rate stated in your early retirement certificate.

How long you need to wait before retiring early in order to obtain the highest early retirement benefit rate depends on when you were born.

  • If you were born between 1 January 1956 and 30 June 1959, the so-called postponement rule applies.
  • If you were born after 1 July 1959, the so-called two-year rule applies.
  • If you retire early immediately after a period on benefits, your early retirement rate will not exceed 91% of the highest early retirement benefit rate.

If you postpone early retirement and continue to work, you’ll be able to earn a tax-free premium. The tax-free premium will be paid when you reach the state pension age.

Read more about the tax-free premium

Deductions will be made from your early retirement benefits for your pension plans, regardless of whether the pensions are paid out with the early retirement benefits.

If your pensions are not paid out with your early retirement benefits, or if they are paid out as a lump sum, the basis of the calculation will be 80% of the annual payout on your life-long pensions and 5% of the value of your other pension plans. Your early retirement benefits will be reduced by 80% of the calculation basis.

If, together with your early retirement benefits, you receive payouts under a pension plan which was set up in the course of an employment relationship, your early retirement benefits will be reduced by 64% of the pension payout.

Your early retirement benefits will also be reduced if a pension is paid out after your 60th birthday, but before your early retirement.

Six months before the early retirement age, the pension companies will report the value of your pension plans to us as your unemployment insurance fund. They will also report any pensions which have been paid after your 60th birthday, but before your early retirement.

Click here to see the funds accumulated in your Danish pension plans at PensionsInfo

Early retirement contributions: how much, how long?

As a member of CA, you pay a fee to be a member of the unemployment insurance fund. If you want to join the early retirement scheme, you must also pay an additional membership fee − an early retirement contribution.

To earn the right to early retirement benefits, you must pay early retirement contributions for up to 30 years.

The early retirement contribution is:

  • DKK 1,563 per quarter for full-time insured members
  • DKK 1,041 per quarter for part-time insured members

Like the membership fee for the unemployment insurance fund, the early retirement contribution is tax-deductible.

Read more about payment of early retirement contributions

Pausing your early retirement contributions

If you were born on 1 January 1976 or later, you may pause your payments into the early retirement scheme. It requires that you have paid into the early retirement scheme for at least one day.

You decide when and for how long you want to pause payments and whether you want to divide your pause into several periods. 

Payment-free periods

If you were born in the period from 1 January 1959 to 31 December 1975, you may pause payments into the early retirement scheme. This is called a payment-free period. 

We write to you just before you turn 30 and ask whether you want to join the early retirement scheme. The earliest day you can join is the date when we receive your email.

Read more about joining the early retirement scheme

The early retirement age follows the state pension age which is again determined by your date of birth.

Click here for an overview of early retirement and state pension age

If you want to retire early, you must send us an application. The application form is available at our website. The earliest day you can retire early is the date we receive your application.

While on early retirement benefits

Even if you’re on early retirement benefits, you can still work and to a limited extent carry out activity as self-employed. But then it will affect your early retirement benefits. That is also the case if you have other earned income or receive holiday allowance.

Pension, holiday and stays abroad may also affect the early retirement benefits you’ll receive.

This is how your early retirement benefits will be paid out.

You’ll receive early retirement benefits for whole calendar months. Corresponding to 160.33 hours before any deductions regardless of the number of days in the relevant month.

If you do not work at all while on early retirement benefits, you can choose just to send us a certificate every six months. Then we’ll automatically pay out your early retirement benefits every month without you having to submit an early retirement benefit form. When we consider your application for early retirement benefits, we’ll ask you about this.

If you choose to work while on early retirement benefits, you cannot choose just to send us a certificate every six months. Then you need to send us an early retirement benefit form every month. On the early retirement benefit form you enter details on work and income in the relevant month. Based on this information, we’ll pay out your early retirement benefits. 

Your early retirement benefits will be paid out on the final banking day of the month. If you’re required to submit an early retirement benefit form every month because you’re working part time, we must receive the form approximately one week before the end of the month.

If we receive it later, it may delay the payment of your early retirement benefits.

If you submit the early retirement benefit form approximately one week before the end of the month, you will not know whether you get a job or other income in the last week that may affect your early retirement benefits.

This is why we pay out early retirement benefits on account. In other words, the payment is subject to adjustments.

At the end of the month, we compare the information you give in the early retirement benefit form with information we receive from your employer (if any) about hours of work and income.

In case of differences, we adjust your early retirement benefits. We will always contact you before adjusting the benefits to allow you to respond if you do not agree.

When to submit the early retirement benefit form

If you’re working, you must submit an early retirement benefit form every month and it’s not enough to submit a certificate every six months.

Instead you must submit a monthly application for early retirement benefits using an early retirement benefit form that you must send to us via our website.

You can submit your early retirement benefit form approximately one week before the end of the month.

If we receive it later, it may delay the payment of your early retirement benefits.

Click here to see when you are required to submit your early retirement benefit form

The deadline for submission of your early retirement benefit form is one month plus ten days.

If, for instance, you are to receive early retirement benefits for the month of July, we need to receive your early retirement benefit form no later than 10 September.

If we receive your early retirement benefit form after expiry of the deadline, we cannot pay out benefits for that month.

Click here to see a list of deadlines for submission of the early retirement benefit form

You may have as much income from paid work as you like, but it will affect your early retirement benefits.

However, we can only pay out supplementary early retirement benefits to you if we can pay out early retirement benefits for at least 14.8 hours every month. This means that if you work more than 145.53 hours in a month, you will not be entitled to early retirement benefits for that month.

One paid hour worked will result in the deduction of one hour from your early retirement benefits.

If your employer fails to report paid hours worked to the Income Register of the Danish Customs and Tax Administration (SKAT), but only reports the income you have earned, we need instead to convert your income to determine how it will affect your early retirement benefits.

We do so using a conversion rate of 259.80. If, for instance, you earn DKK 1,000, we will deduct 3.85 hours from your early retirement benefits.

Less stringent deductions in case of hourly pay below the conversion rate

If you receive an hourly pay below the conversion rate of DKK 259.80, the deductions for the first DKK 41,164 you earn in a year may be less stringent.

On the other hand, we cannot pay out supplementary early retirement benefits to you if you have more than 128 hours of work in a month.

Once the less stringent deductions are used up, you’ll be entitled to early retirement benefits even when you have more than 128 hours of work in a month.

The less stringent deductions are calculated using your pay divided by the conversion rate of 259.80. In this way, the hours deducted from your early retirement benefits will be less than the hours you actually work.

If your hourly pay is lower than the highest early retirement benefit rate of DKK 120.51 per hour, your hourly pay will be fictively fixed at DKK 120.51 when we calculate the number of hours to be deducted from your early retirement benefits.

When you have earned more than DKK 41,164 in a calendar month, the usual hour-for-hour deductions will be used.

You can carry out activity as self-employed to a limited extent when you’re on early retirement benefits.

The total hours of work in your business must be less than 400 hours a year, and the contribution margin may not exceed DKK 84,894. 

You may not start up your business until you have been given permission to do so by CA. Always contact us before starting up your business.

Your pension savings affect your early retirement benefits. How it will affect your early retirement benefits depends on your age and the timing of your early retirement.

Read more about how your pension savings will affect your early retirement benefits

There will be deductions from your early retirement benefits when you claim holiday pay and take paid holiday while on early retirement benefits.

The amount deducted depends on the number of paid holidays you have accrued.

Living, working and staying in another EEA country, Greenland and on the Faroe Islands

You may live and work in another EEA country, Greenland or the Faroe Islands while on early retirement benefits.

If you live and work on the Faroe Islands or in another EEA country, you must take out unemployment insurance there and resign your CA membership. In such cases, you can continue receiving early retirement benefits even though you are not currently a member of a Danish unemployment insurance fund.

Living, working and staying outside the EEA, Greenland and the Faroe Islands

When you receive early retirement benefits, you may stay temporarily in countries outside the EEA, Greenland or the Faroe Islands for no more than three months in total in every calendar year.

If at the time you’re leaving, you already know that your stay will not be temporary, we’ll stop paying out early retirement benefits already when you leave. You must give CA notice of both long-term and temporary stays abroad.

The general rule is that you are not entitled to early retirement benefits if you work abroad outside the EEA, Greenland or the Faroe Islands. Consult CA before you take a job outside the EEA, Greenland or the Faroe Islands.

Information on opting-out of the early retirement scheme

How to opt out of your early retirement scheme

You may elect to opt out of your early retirement scheme at any time. If you change your mind and decide to opt out of the scheme, you must send us a special AR 252 form.

Can I cancel my opt-out?

Have you previously opted out of your early retirement scheme and have now changed your mind? If you were born before 1 July 1960, you can in some cases cancel your opt-out and join the early retirement scheme again. In that case, please contact us and we’ll guide you on your options.

Read more about how to cancel your opt-out